The European Union As a Social Actor? an Analysis of Social Protection in the EU’S Electricity Sector

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The European Union As a Social Actor? an Analysis of Social Protection in the EU’S Electricity Sector Working Paper 143/2015 The European Union as a Social Actor? An Analysis of Social Protection in the EU’s Electricity Sector Hanan Haber Published by Helmut Kohl Institute for European Studies and the Konrad-Adenauer-Stiftung Jerusalem 9190501, Israel Tel: (972 2) 588-3286 Fax: (972 2) 588-1535 פורום אירופה באוניברסיטה העברית [email protected] EUROPEAN FORUM AT THE HEBREW UNIVERSITY http://www.ef.huji.ac.il Helmut kohl institute for european studies Working Paper 143/2015 The European Union as a Social Actor? An Analysis of Social Protection in the EU’s Electricity Sector Hanan Haber Disclaimer: The views expressed in this publication are the sole responsibility of the author and do not necessarily reflect the views of the Konrad-Adenauer-Stiftung פורום אירופה באוניברסיטה העברית EUROPEAN FORUM AT THE HEBREW UNIVERSITY Helmut kohl institute for european studies © European Forum at the Hebrew University, Jerusalem All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the European Forum at the Hebrew University of Jerusalem and the author of this paper. European Forum at the Hebrew University, Jerusalem 9190501, Israel | http://www.ef.huji.ac.il Tel: (972 2)588-3286 | Fax: (972 2)588-1535 | [email protected] I would like to thank the Konrad-Adenauer-Foundation and the European Forum at the Hebrew University for their generous support of this study. I would like to thank my instructor Prof. David Levi-Faur for his guidance and support. I would also like to thank Sharon Gilad, Debora Mabbett, Michael Shalev, John Gal, and the staff and students at the EISS summer course on “History, Institutions and Policies of European Integration” at the University of Agder, Norway. All usual disclaimers apply.1 1 Hanan Haber is a PhD candidate at the Federmann School of Public Policy, The Hebrew University of Jerusalem. Email: [email protected]. Abstract Social regulation at the EU level is on the increase at least when it comes to the electricity sector and following the gradual liberalization of the sector. This paper asks how and for what reasons social protection of vulnerable consumers has been introduced into the process, focusing on the period between the second and third directives on electricity sector liberalization (2005-2009). In this period these protections grew substantially, gaining a more binding and a more transnational nature, a process led by the Commission and the European Parliament. This development runs counter to our understanding of the electricity sector reform in the EU as focused primarily on the creation of open competitive markets. The paper argues that the introduction of protection of vulnerable consumers in the electricity sector reform facilitates (rather than hinders) the process of economic reform, by adding political and democratic legitimacy to the liberalization process. It asserts that adding social protection to economic reform in this case is instructive regarding the development of the EU as a regulatory state and the regulatory state more generally. Economic reform and economic regulation create the conditions for, and require, more social protection and social regulation. Separating the social and economic spheres may seem like an economically efficient strategy, but may ultimately have the opposite effect. Contents Preface ....................................................................................................................... 4 1. Theoretical framework......................................................................................... 7 A regulatory perspective on social protection in the electricity sector .................. 9 2. Electricity sector reform in the EU..................................................................... 14 Adding a social dimension to the electricity directives ....................................... 15 3. The policy process: how and why were social measures introduced into the third electricity directive? .......................................................................................... 17 4. Comparative discussion ..................................................................................... 26 5. Conclusions ....................................................................................................... 28 Preface This paper brings together two different yet related themes. First, what is the role of social policy at the European Union (EU) level? Second, what is the role of regulation in social protection, and what is the relation between social and economic policy more generally? The paper argues that social policy is growing and becoming more binding and transnational at the EU level. However, this is done through regulation, as part of the process of economic liberalization. Regulation is being used to protect vulnerable consumers in light of the social needs created by reform, but also facilitating further economic liberalization, by legitimizing this process in political and democratic terms. The common wisdom on social policy in the EU, especially from an intergovernmental approach, argues that social issues are left primarily to the member states, as these issues are too politically sensitive and historically entrenched to be dealt with at the EU level. As a result, “examples of EU social legislation have been few and far between” (Hix 2005, 256). “In other policy areas, particularly social policy, the role of the EU seems much less significant, secondary at best, insignificant at worst” (Geyer 2000). From a regulatory perspective, a similar expectation arises regarding limited development of social policy in the EU, but for a different reason. In this view, the EU, which can be seen as an “almost pure” example of a regulatory state, lacks the ability to engage in social policy and taxing and spending, and the democratic legitimacy to do so. As a result, it will focus mainly on Pareto efficiency enhancing economic regulation (Majone 1993, 1997, 2011). In this regard, the EU is an example of Majone’s thesis on the rise of the regulatory state. While some regulation on social issues does exist, it is limited to several specific areas. From both an EU-specific perspective and a more general regulatory-state perspective, then, the introduction of social policy at the EU level is theoretically unlikely. My findings suggest that social policy plays a larger role at the EU level than either of these perspectives assumes. This is done, however, with regulation, rather than through social spending, beyond the areas that are usually considered part of the welfare state and beyond theareas that are considered the core of the EU’s competence. Rather, this paper demonstrates how social policy has become part of the process of economic reform, both following the process of reform and facilitating the continued process of liberalization, through adding political and democratic legitimacy. 4 To substantiate this claim, this paper examines a critical case of economic liberalization in the EU: electricity sector reform. The development of the three EU electricity directives from 1996 to 2009 demonstrates a shift in the regulatory agenda over time. Whereas the first directive focuses on the economic aspects of liberalization, the second and third directives introduce extensive and detailed regulatory provisions on social issues, specifically those regarding the protection of vulnerable consumers, the ‘energy poor.’ Specifically, this paper asks how and for what reasons social provisions were introduced into the process of electricity sector reform from 2005 to 2009? The focus is on the period during which the third directive was being prepared, in which there was significant growth in the protection of vulnerable consumers, adding binding regulation at the EU level. In order to answer this question, this paper traces the policy process through which social policy measures were introduced. This includes the collection and analysis of documents published by the different actors, including calls and responses for consultations, reports, legislation and media coverage. The findings show a growth in the regulation aimed at protecting vulnerable consumers in the three electricity directives. The liberalization and privatization of the electricity sectors in the EU, prompted by the EU electricity directives (the first of which was published in 1996), emphasized competition and freedom of choice. Social aspects, that is, issues of service disconnection due to debt and arrears, and social protection of vulnerable consumers, went largely unaddressed in the initial path of liberalization. Over time, however, this gap was increasingly filled. While the earliest directive asserts that member states are allowed to impose public service obligations, as long as this does not hinder the process of liberalization, the later directives explicitly address social issues regarding vulnerable consumers and energy poverty requiring member states to acknowledge these issues, define the consumers affected and devise action plans to address the social issues in this sector. Analysis of the policy process between the second and third electricity directives reveals a change in the policy agenda during this period. Although social protection had been part of the second directive, the discussion leading up to the third directive was initially framed by the Commission
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